Surplus budget fails as deficit spills over to second half of NDP 11
The 2020/21 national budget projections forecast another deficit for Botswana; this emerged at a Budget Pitso and launch of the Budget strategy paper by the Ministry of Finance & Economic Development in Gabcorone this week.
Deliberating on the strategy paper, experts from the Ministry said the 2020/21 budget points to a deficit, contrary to one of the NDP 11 fiscal objective of maintaining modest surpluses in the second half of the Plan period. When National Development Plan 11 was launched in 2017 it was revealed that the first three financial years would run at a contained budget deficit financed from both external and domestic capital market. This was reiterated by Minister of Finance Kenneth Matambo when delivering the 2019/20 Budget Speech in February his year. He said government would be eying a slight surplus going into 2020.
However discussions from the Budget Pitso as well as figures contained in the strategy paper reveal something completely different. Budget defict runs will spill over into the second half of NDP 11.The current 2019/2020 budget marks the end of the first half of the implementation of the National Development Plan (NDP) 11.
Since the beginning of the implementation of NDP 11 in 2017/2018, a cumulative budget deficit of P16.11 billion has been recorded. This according to authorities from the national treasury was largely due to a decline in projected mineral revenues against the rising recurrent commitments.
2020/21 EXPENDITURE WILL SUFFOCATE REVENUE STREAMS
In the upcoming financial year projected Total Revenues and Grants for 2020/2021 amounts to P59.1 billion, representing an increase of 1.5 percent, compared to P58.2 billion estimated in 2019/2020. The projected slow growth in total revenues is largely driven by the Mineral revenues, which is expected to account for 29.6 percent to the total revenue, followed by Customs and Excise revenues at 26 percent.
Ministry of Finance says compared to the NDP 11 projected figure of P62.1 billion, the forecast total revenue for 2020/2021 is well below the NDP 11 figure by 4.8 percent, reflecting to a large extent the downward revision in mineral revenues as a result of the anticipated investments at Debswana Cut 3 and Cut 9 projects which are aimed at extending the productive capacity of the two major Debswana mines. This follows the decision by Debswana Shareholders to finance the investments through dividends.
On the expenditure fronts total expenditure and net lending in 2020/2021 is projected at P66.1 billion, of which P54.1 billion is allocated for recurrent expenditure, while P12.0 billion is earmarked for development expenditure. The projected amount for the development expenditure is also below the projected NDP 11 figure of P16.9 billion by 29 percent. The downward revision in the development budget is a result of the growth in recurrent budget, following a 16.5 percent upward revision in order to cater for the projected increase in wages and salaries
OVER P6.9 BILLION DEFICIT PROJECTED
The projected figures depict a fiscal balance stand of P6.94 billion, which is 3.1 percent of GDP. Cumulatively, the deficit points to P10.86 billion during the second half of the Plan period, which is an addition to the P16.11 billion recorded in the first half of the Plan period.
The anticipated budget deficit is expected to be financed through a combination of borrowing mainly domestic and drawing down on Government cash balances held at Bank of Botswana. The ministry says this however compromises fiscal sustainability in the long term, as well as the ability to meet short term obligations such as regular payment for imports of goods and services.
PREVAILING POTENTIAL HEADWINDS
Ministry of Finance and Developmental Planning has cautioned the nation of serious trouble that lies ahead should current macroeconomic and fiscal headwinds persist. The Macroeconomic space will continue receiving headblows from the China –US trade tension putting pressure on rough diamond sales global economic outlook. It is underscored in the Budget Strategy paper that weak diamond sales pose downside risks to mineral revenues, which remain low following the decision by Debswana to finance the Cut 3 and Cut 9 projects from the dividends.
Furthermore, risks to the revenue outlook take into account the continued weak market for rough diamonds which has affected sales through De Beers Global Sightholder Sales. The negative fiscal outlook is exacerbated by increased recurrent pressures arising from the need to cater for the recent salary adjustments as well as other expenditure pressures arising from investment in critical infrastructure such as those for water and electricity. This is expected to raise the recurrent budget in the years ahead, while at the same time, crowding out development spending necessary for growth.
Finance experts say the expected decline in revenues amidst rising expenditure pressures give rise to budget deficits, which in turn, need to be financed by either borrowing or drawing down on Government cash reserves; the latter which has experienced significant deterioration over the past decade. “This has implications on the country’s ability to sustain and cushion the economy against any future external shocks, debt levels, as well as, to meet its import obligations and credit worthiness”
SUBDUED DIAMOND MARKET: HIGH RISK THREAT
Rough diamonds sales fell by well over 50 percent during the sixth De Beers Global Sightholder sales cycle, following a 16 percent drop in the second quarter of 2019. The decline in diamond sales has already started to weigh down on output, as Debswana adjusted mining production downwards during the second quarter of the year in line with the weaker demand for rough diamonds.
Production decreased by nine (9) per cent to 5.7 million carats during the second quarter of the year. This was also exacerbated by a decrease in production by 23 percent at Orapa to 2.5 million carats, following a planned plant shut down. “Should the situation persists, it may pose further risks to the domestic revenue outlook, as it would affect the growth in mining value added and a spill over to other sectors that depend on mining activities such as manufacturing and finance business services, which include diamond cutting and polishing as well as sorting and valuation” writes Ministry of Finance on the Strategy paper.
DIVERSIFICATION OF NATIONAL REVENUE PROFILE KEY
The 2020/21 Budget Strategy paper recommends that appropriate measures such as diversifying the current revenue profile be put in place with a view to cushioning against any future pressures on volatile mineral and customs & excise revenue streams.
“This calls for the need to adhere to Government’s fiscal rule of restricting further growth in the recurrent expenditure in order to create room for the subdued development budget, in particular, by allowing for spending on high return projects, which can create employment opportunities”
On the emphasis the paper underscores that there is need to restore the fiscal position of the country, as part of the maintenance of macroeconomic stability. Ministry of Finance says Successive budget deficits experienced since the commencement of NDP 11 have placed the country on an unsustainable fiscal trajectory, which needs to be seriously addressed in the second half of NDP 11. “Going forward, measures will need to be taken to restore fiscal sustainability, as part of the suite of strategies to maintain macroeconomic stability necessary for growth and employment creation.
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Nigerians, Zimbabweans apply for Chema Chema Fund
Fronting activities, where locals are used as a front for foreign-owned businesses, have been a long-standing issue in Botswana. These activities not only undermine the government’s efforts to promote local businesses but also deprive Batswana of opportunities for economic empowerment, officials say. The Ministry of Trade and Industry has warned of heavy penalties for those involved in fronting activities especially in relation to the latest popular government initiative dubbed Chema Chema.
According to the Ministry, the Industrial Development Act of 2019 clearly outlines the consequences of engaging in fronting activities. The fines of up to P50,000 for first-time offenders and P20,000 plus a two-year jail term for repeat offenders send a strong message that the government is serious about cracking down on this illegal practice. These penalties are meant to deter individuals from participating in fronting activities and to protect the integrity of local industries.
“It is disheartening to hear reports of collaboration between foreigners and locals to exploit government initiatives such as the Chema Chema Fund. This fund, administered by CEDA and LEA, is meant to support informal traders and low-income earners in Botswana. However, when fronting activities come into play, the intended beneficiaries are sidelined, and the funds are misused for personal gain.” It has been discovered that foreign nationals predominantly of Zimbabwean and Nigerian origin use unsuspecting Batswana to attempt to access the Chema Chema Fund. It is understood that they approach these Batswana under the guise of drafting business plans for them or simply coming up with ‘bankable business ideas that qualify for Chema Chema.’
Observers say the Chema Chema Fund has the potential to uplift the lives of many Batswana who are struggling to make ends meet. They argue that it is crucial that these funds are used for their intended purpose and not siphoned off through illegal activities such as fronting. The Ministry says the warning it issued serves as a reminder to all stakeholders involved in the administration of these funds to ensure transparency and accountability in their disbursement.
One local commentator said it is important to highlight the impact of fronting activities on the local economy and the livelihoods of Batswana. He said by using locals as a front for foreign-owned businesses, opportunities for local entrepreneurs are stifled, and the economic empowerment of Batswana is hindered. The Ministry’s warning of heavy penalties is a call to action for all stakeholders to work together to eliminate fronting activities and promote a level playing field for local businesses.
Meanwhile, the Ministry of Trade and Industry’s warning of heavy penalties for fronting activities is a necessary step to protect the integrity of local industries and promote economic empowerment for Batswana. “It is imperative that all stakeholders comply with regulations and work towards a transparent and accountable business environment. By upholding the law and cracking down on illegal activities, we can ensure a fair and prosperous future for all Batswana.”
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Merck Foundation and African First Ladies mark World Health Day 2024
Merck Foundation, the philanthropic arm of Merck KGaA Germany marks “World Health Day” 2024 together with Africa’s First Ladies who are also Ambassadors of MerckFoundation “More Than a Mother” Campaign through their Scholarship and Capacity Building Program. Senator, Dr. Rasha Kelej, CEO of Merck Foundation emphasized, “At Merck Foundation, we mark World Health Day every single day of the year over the past 12 years, by building healthcare capacity and transforming patient care across Africa, Asia and beyond.
I am proud to share that Merck Foundation has provided over 1740 scholarships to aspiring young doctors from 52 countries, in 44 critical and underserved medical specialties such as Oncology, Diabetes, Preventative Cardiovascular Medicine, Endocrinology, Sexual and Reproductive Medicine, Acute Medicine, Respiratory Medicine, Embryology & Fertility specialty, Gastroenterology, Dermatology, Psychiatry, Emergency and Resuscitation Medicine, Critical Care, Pediatric Emergency Medicine, Neonatal Medicine, Advanced Surgical Practice, Pain Management, General Surgery, Clinical Microbiology and infectious diseases, Internal Medicine, Trauma & Orthopedics, Neurosurgery, Neurology, Cardiology, Stroke Medicine, Care of the Older Person, Family Medicine, Pediatrics and Child Health, Obesity & Weight Management, Women’s Health, Biotechnology in ART and many more”.
As per the available data, Africa has only 34.6% of the required doctors, nurses, and midwives. It is projected that by 2030, Africa would need additional 6.1 million doctors, nurses, and midwives*. “For Example, before the start of the Merck Foundation programs in 2012; there was not a single Oncologist, Fertility or Reproductive care specialists, Diabetologist, Respiratory or ICU specialist in many countries such as The Gambia, Liberia, Sierra Leone, Central African Republic, Guinea, Burundi, Niger, Chad, Ethiopia, Namibia among others. We are certainly creating historic legacy in Africa, and also beyond. Together with our partners like Africa’s First Ladies, Ministries of Health, Gender, Education and Communication, we are impacting the lives of people in the most disadvantaged communities in Africa and beyond.”, added Senator Dr. Kelej. Merck Foundation works closely with their Ambassadors, the African First Ladies and local partners such as; Ministries of Health, Education, Information & Communication, Gender, Academia, Research Institutions, Media and Art in building healthcare capacity and addressing health, social & economic challenges in developing countries and under-served communities. “I strongly believe that training healthcare providers and building professional healthcare capacity is the right strategy to improve access to equitable and quality at health care in Africa.
Therefore, I am happy to announce the Call for Applications for 2024 Scholarships for young doctors with special focus on female doctors for our online one-year diploma and two year master degree in 44 critical and underserved medical specialties, which includes both Online Diploma programs and On-Site Fellowship and clinical training programs. The applications are invited through the Office of our Ambassadors and long-term partners, The First Ladies of Africa and Ministry of Health of each country.” shared Dr . Kelej. “Our aim is to improve the overall health and wellbeing of people by building healthcare capacity across Africa, Asia and other developing countries. We are strongly committed to transforming patientcare landscape through our scholarships program”, concluded Senator Kelej.
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Interpol fugitive escapes from Botswana
John Isaak Ndovi, a Tanzanian national embroiled in controversy and pursued under a red notice by the International Criminal Police Organization (Interpol), has mysteriously vanished, bypassing a scheduled bail hearing at the Extension 2 Magistrate Court in Gaborone. Previously apprehended by Botswana law enforcement at the Tlokweng border post several months earlier, his escape has ignited serious concerns.
Accused of pilfering assets worth in excess of P1 million, an amount translating to roughly 30,000 Omani Riyals, Ndovi has become a figure of paramount interest, especially to the authorities in the Sultanate of Oman, nestled in the far reaches of Asia.
The unsettling news of his disappearance surfaced following his failure to present himself at the Extension 2 Magistrate Court the preceding week. Speculation abounds that Ndovi may have sought refuge in South Africa in a bid to elude capture, prompting a widespread mobilization of law enforcement agencies to ascertain his current location.
In an official communiqué, Detective Senior Assistant Police Commissioner Selebatso Mokgosi of Interpol Gaborone disclosed Ndovi’s apprehension last September at the Tlokweng border, a capture made possible through the vigilant issuance of the Interpol red notice.
At 36, Ndovi is implicated in a case of alleged home invasion in Oman. Despite the non-existence of an extradition treaty between Botswana and Oman, Nomsa Moatswi, the Director of the Directorate of Public Prosecution (DPP), emphasized that the lack of formal extradition agreements does not hinder her office’s ability to entertain extradition requests. She highlighted the adoption of international cooperation norms, advocating for collaboration through the lenses of international comity and reciprocity.
Moatswi disclosed the intensified effort by law enforcement to locate Ndovi following his no-show in court, and pointed to Botswana’s track record of extraditing two international fugitives from France and Zimbabwe in the previous year as evidence of the country’s relentless pursuit of legal integrity.
When probed about the potential implications of Ndovi’s case on Botswana’s forthcoming evaluation by the Financial Action Task Force (FATF), Moatswi reserved her speculations. She acknowledged the criticality of steering clear of blacklisting, suggesting that this singular case is unlikely to feature prominently in the FATF’s assessment criteria.